Bitter Pill: GlaxoSmithKline Pays $750M Over Defective Drugs

Drug maker GlaxoSmithKline will pay a $750 fine to settle allegations that the company manufactured defective drugs -- including the antidepressant Paxil -- at a GSK facility in Puerto Rico.

Certain batches of drugs manufactured at the Puerto Rico plant were misidentified and were inconsistent in terms of their active ingredient levels and their purity -- in some cases falling "materially below, the strength, purity or quality specified in the drugs' FDA applications," the U.S. Department of Justice says. It's important to note that there were no reports of patients being harmed by the defective drugs; the penalty against GSK is for the company's ongoing violation of laws meant to ensure the drugs' quality and safety.

In addition to Paxil, other drugs that were allegedly manufactured with defects include Kytril (an anti-nausea drug), Bactroban (used to treat skin infections), and Avandamet (for treatment of Type II diabetes).

Under the deal, SB Pharmco Puerto Rico Inc. (a subsidiary of GSK) has agreed to plead guilty to charges related to the selling of the defective drugs. SB Pharmco will pay a criminal fine and forfeiture of $150 million, and another $600 million to settle allegations under the federal False Claims Act and related state claims.

Here's some related news, and it should serve as incentive for corporate mischief-spotters everywhere to grab their whistles and blow like Dizzy Gillespie. Cheryl Eckard is the ex-quality assurance manager at GSK who filed the whistleblower suit against the company in 2004, shining a spotlight on the questionable manufacturing practices at the Puerto Rico facility. Eckard will receive a lottery jackpot-like $96 million as compensation for coming forward and exposing GSK's wrongdoing.